Why public sector workers are like bankers

Public sector workers should not be surprised when they look in the mirror and see a banker, says The Extended Society

On the 10th of March 2011, Michael Johnson of The Centre for Policy Studies asked the following question on the BBC’s Wake Up To Money programme: “Is it reasonable that 80 per cent of the labour force essentially finances the certainty of income in retirement of the remaining 20 per cent in the public sector, when they themselves will not be able to enjoy the same certainty?”

It indeed seems unreasonable that those in the private sector should be funding the pensions of workers in the public sector. When viewing a cut in pensions, however, it is hard not to feel sorry for those who made the rational choice to join the public sector because they believed they would get a higher pension when they retired. For this reason it is not surprising to hear that Lord Hutton believes these promises should be kept.

It is right for the Government to keep its past promises on pensions in the same way as it was right for banks to pay the bonuses. Apart from the legal implications of not keeping these past promises on pensions and bonuses, such a decision would severely undermine the credibility of both employers.

Perverse incentives, such as government guarantees, low interest rates, and a government desire to expand home ownership, have fuelled seemingly immoral banker bonuses. The subsequent meltdown of the banking systems means that the taxpayers own many of the banks, and are thus effectively paying the bonuses themselves.

Where public sector workers may not be demanding footballers’ wages, evidence suggests that wages in the public sector are not lower than in the private sector. It is therefore questionable that the extra cost that public pensions bring should, akin to the banker bonuses, fall on the taxpayer. Of those taxpayers benefited by the 20 per cent in the public sector, it is the 80 per cent in the private sector that pay the bill.

Many public sector workers demand that bankers pay back their bonuses with higher taxes. In this light, some private sector workers may ask for a special tax on public sector workers. We will not suggest such petty actions; in a past article, it was pointed out that the “Extended Society” has not blamed the bankers for their mercenary actions. Here, again, we will not blame public sector workers for theirs. We would simply like to illustrate that bankers and public sector workers are not as dissimilar as they may like to think. And that it is right for the government to seriously re-think its pension policies.